Directors and Officers Insurance for Private Companies

Directors and Officers Insurance for Private Companies

Although directors and officers insurance, often referred to as D&O coverage, is more typically associated with public companies, a growing number of astute private company owners are recognizing the benefits D&O coverage can provide for their businesses.

As the name suggests, D&O coverage is designed to protect company directors and officers against allegations made against them personally in the course of performing their corporate duties. Like general liability insurance policies, D&O is designed to provide financial and legal protection to officers and directors who are sued individually.

While the company and its assets will be protected by a commercial general liability policy, D&O insurance protect directors, officers, and their personal assets.

Having this protection is important because more and more private firms are sued for a variety of reasons. For example, shareholders, employees (present and former), customers, suppliers, competitors, or government regulators can make allegations related to unfair business practices, failure to meet contractual obligations, regulatory violations, and just about anything else someone can think of.

Some typical reasons for private companies to be sued include:

Breach of fiduciary duties or contacts

Conflicts of interest

Disclosing false or misleading information

Financial reporting errors

Regulatory violations

Misuse or disclosure of trade secrets

Mismanagement of assets

In addition to providing protection for personal assets, D&O insurance also provides money for defending a lawsuit (as well as any settlements or damages that are assessed).

Along with financial protection D&O insurance can also provide peace of mind for business owners and officers. The coverage can also be very helpful in recruiting directors and officers to work with your company. In fact, failing to buy D&O insurance, or not having enough coverage, can make it difficult to attract officers or directors who may be worried about exposing their personal or family assets if they agree to work with your private company.

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